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Accenture Digital density index guiding digital transformation 2015
1. Guiding digital transformation
Digital Density Index
A new way for government and business leaders
to understand, measure, and manage digital
strategies to drive growth and competitiveness
2. The Accenture Digital Density Index empirically shows
increased penetration of digital technologies in economic
activity can significantly lift productivity and GDP
growth—potentially driving US$1.36 trillion in additional
output in the world’s top 10 economies in 2020.
2 Digital Density Index
3. The key?
Understand what drives Digital Density,
measure it, and then manage it.
Digital Density Index 3
4. Introduction
Can digital technologies
help economies become
more competitive and
grow more strongly?
New research from
Accenture provides
empirical evidence
they can.
In a joint study, Accenture Strategy
and Oxford Economics not only
confirmed the link between increased
use of digital technologies and greater
productivity, but also quantified the
resulting impact on competitiveness
and economic growth (see “About
the Research” for more details).
According to our analysis, increased
use of digital technology could add as
much as US$1.36 trillion to the GDP
of the world’s top 10 economies in
2020—which is 2.3 percent more than
baseline forecasts (Figure 1). In this
ambitious but achievable scenario, a 10
point improvement in Digital Density
could raise annual average growth
rates between now and 2020 by around
0.25 percentage points in advanced
economies and around 0.5 percentage
points in emerging markets.
Figure 1: Impact of a ten point boost in Digital Density to GDP levels in 2020.
Effect on 10-point uplift in country digital density
Uplift in 2020 GDP under ten point Digital Density improvement scenario for the world’s
top ten economies, USD billion, 2014 prices
$0 $50 $100 $150 $200 $300$250 $400$350 $450
China $418 bn
Brazil $97 bn
Germany $75 bn
France $57 bn
Italy $41 bn
United States $365 bn
United Kingdom $57 bn
Japan $114 bn
India $101 bn
Canada $38 bn
On GDP in 2020 On average annual GDP
growth rates (2015 to 2020)
In advanced economies 1.8 percent higher
than baseline
0.25 percentage points higher
than baseline
In emerging economies 3.4 percent higher
than baseline
0.5 percentage points higher
than baseline
In the world’s
top 10 economies
2.3 percent higher
than baseline
0.32 percentage points higher
than the baseline
4 Digital Density Index
6. The Accenture Digital
Density Index is
a comprehensive
scorecard of what truly
matters to digitally led
economic productivity.
A higher score on the Digital Density
Index reflects a broader and deeper
adoption of digital technologies, as
well as the skills, ways of working, and
regulatory frameworks needed to realize
their economic potential. Our analysis
shows that boosting an economy’s
score on the Accenture Digital Density
Index can lead to greater productivity
and, other things being equal, faster
GDP growth.
Reflecting the pervasive nature of
digital technology, the index covers
more than 50 indicators across four
equally weighted areas of economic
activity: Making Markets, Running
Enterprises, Sourcing Inputs, and
Fostering Enablers (Figure 2).
These indicators range from the
volume of transactions conducted
online, the extent to which interactions
between firms are automated, and
the use of technologies such as the
cloud to streamline processes; to the
pervasiveness of technology skills in a
business, the use of digital platforms
to access capital and talent, and
government and business acceptance
of new digitally driven business models.
Figure 2: Areas of economic activity measured by the Digital Density Index
Making Markets
Running Enterprises
This is the recognition that existing markets are
becoming increasingly digital, and new markets are
being created through digital means.
Running enterprises relates to the extent to which
firms are embracing digital technologies and
activities to carry out business functions such as
supply chain, strategy, talent, procurement and
research and development.
Sourcing Inputs
Fostering Enablers
This is the extent to which the factors of
production are sourced and used with digital
technology. The second part of sourcing inputs is to
capture the degree to which digital technologies change
the lifecycle of sourcing these factors for the business.
The impact of digital is in part enabled by the
institutional and socio-economic environment.
6 Digital Density Index
7. The Digital Density Index
can help to gauge the
current Digital Density of
an economy and guide
digital investments in
a business.
For example, Figure 3 shows 17 leading
economies ranked according to their
Digital Density scores, while Figure
4 illustrates the differences between
the Digital Density profiles of the
Netherlands (the Digital Density leader)
and the world’s four largest economies
(USA, China, Japan and Germany).
Such profiles can be an important
starting point for leaders as they
shape and implement digital strategies
and target specific opportunities for
improvement. To illustrate, Figure 5
shows how France could raise its digital
density by approximately 10 points
through concerted efforts in eight
areas and, according to our model,
significantly boost productivity and
growth over time.
According to our model, it can take
up to six years for the full economic
benefit of greater digital density to
be felt, with productivity benefits
feeding through fully into trend
growth rates of GDP over this period.
This insight should be a catalyst for
governments and businesses to act
now to increase the digital density
of economies and organizations.
Figure 3: Digital Density scores for 17 leading economies (0-100)
Making Markets Running Enterprises Sourcing Inputs Fostering Enablers
Germany
UK
US
India
Italy
France
Brazil
Belgium
China
Austria
Finland
Netherlands
Sweden
South Korea
Spain
Australia
Japan
0 10 20 30 40 50 60 70 80
Digital Density Index 7
8. Figure 4: Digital Density profiles of leading country the Netherlands and the world’s four largest economies,
USA, China, Japan and Germany
Making Markets
Running Enterprises
Sourcing Inputs
Fostering Enablers
Bottom of range Mid-range Frontier
Customer activity cycle
Digitally contestable
markets
Interfirm collaboration
Bottom of range Mid-range Frontier
Technology process
Strategy process
Business model
Innovation
Research and
development spending
Human capital
Bottom of range Mid-range Frontier
Organizational flexibility
Connectivity
Government spending
Ease of business
Long-term
regulatory outlook
Attitudes in society
Bottom of range Mid-range Frontier
Plant, property,
equipment
Labor
Finance
ChinaUSAThe Netherlands GermanyJapan
8 Digital Density Index
9. Figure 5: An illustrative combination of eight interventions that combined would help France increase its
Digital Density score by ten points.
Making Markets
Expand internet coverage: Match Dutch and Finnish levels
of internet users. Only 88% of the French working age
population used the internet in 2012, compared to 94% in
the Netherlands and Finland. France also ranks 55th in the
world for internet access in schools compared to fifth placed
Netherlands and fourth placed Finland.
Improve mobile connections with customers: Match
Belgian levels of mobile interaction. Our survey data suggests
French firms are placed in the bottom quartile of countries
studied in terms of the quality of their mobile connection
with customers. Following best practices in some of Europe’s
better performers by this metric, such as Belgium, Austria
and the Netherlands, would boost the Making Markets score.
Sourcing Inputs
Embrace remote working: Catch up with the advanced
economy average. France once again registers towards the
bottom of the rankings in the use of digital technologies
to facilitate remote working. Catching up with Germany,
Australia and South Korea, which achieved the study average,
would improve the scores.
Make better use of the industrial internet: Follow best practices
in Austria, Germany, and the Netherlands. France takes the lowest
score in the study for making use of the industrial internet.
Running Enterprises
Human capital: Expand the ICT skills base to Swedish, Finnish
and UK levels. ICT workers currently account for 2.9%
of the workforce, compared to close to 4.0% in the UK,
Sweden and Finland, and around 6% in South Korea.
New digital technologies: Catch up with the European
average for cloud and industrial internet use. Our survey
data suggests France is behind the curve in the application
of these technologies. In an Accenture executive survey
published in 2014, only 37% of executives identified
machine-to-machine communication as important to their
business, compared to a study average of 46%.
Fostering Enablers
Mobile connectivity: Raise mobile broadband usage to UK
levels. France currently lags behind most advanced economies
in mobile broadband usage, with 0.8 subscriptions per head
in 2012 compared to 1.1 in the UK, 1.64 in Finland (Europe’s
highest) and 1.84 in Japan.
Digital government: Raise confidence in public digital service
delivery to German and Belgian levels. France scores highly
in the UN e-government index but business surveys show a
lack of public confidence in the ability of the public sector to
leverage business technologies in France.
Current Fostering Enablers score
Current Running Enterprises score
Current Making Markets score
The rest
0 5 10 15 20 25
Average
Q3Q1
France
Current Sourcing Inputs score
The rest
0 5 10 15 20 25
Average
Q3Q1
France
The rest
0 5 10 15 20 25
Average
Q3Q1
France
The rest
0 5 10 15 20 25
Average
Q3Q1
France
Digital Density Index 9
10. Beyond the technical model –
creating a new mindset
While the Digital Density Index’s indicators can
help pinpoint specific areas for improvement,
the broad areas of economic activity that the
model describes can also help government and
business leaders think differently about how digital
technology transforms business and economies
to capitalize on new growth opportunities.
10 Digital Density Index
12. Making Markets
Understand and support new
business models and markets
Governments need to rethink how they
view disruptive new business models
beyond outdated industry boundaries.
For their part, businesses need to
engage with governments in new ways.
An example of business and government
working together is the German “Smart
Service World” program. Its aim is to
determine how the business models of
suppliers, manufacturers, and operators
will be revolutionized by new types of
products and services. This public—private
partnership supports Germany’s goal
to become the number-one country in
Europe in terms of digital growth.1
Running Enterprises
Transform how
you operate
An original selling point of digital
technologies was their ability to
take time, cost, and distance out of
an activity or process. That still holds
true today. Companies and governments
should increase their use of digital
technologies to transform key business
processes to create greater leaps
in efficiency and productivity.
Global mining company Rio Tinto,
for example, has increased free cash
flow in its copper mining operations
by leveraging data streams from
processing equipment to constantly
optimize the production performance
of the plant.2
In the U.S., the Internal
Revenue Service used predictive
analytics to save $20 billion in tax
fraud refunds in 2012,3
while the
General Services Administration’s Cloud
First policy requires agencies to use
cloud computing where possible to
maximize capacity utilization, improve
IT flexibility and responsiveness, and
minimize cost.4
Sourcing Inputs
Think forward to the Industrial
Internet of Things
To keep growing and innovating,
economies and businesses must
use land, talent, capital, ideas, and
other resources ever more effectively.
The Industrial Internet of Things will
further accelerate the digitalization
of supply chains as objects interact
with objects and humans to optimize
processes or create new product and
service hybrids.
For example, Michelin solutions’
EFFIFUEL solution™ uses high-tech and
high-touch to reduce fuel consumption
in truck fleets. Sensors inside vehicles
collect data on fuel consumption,
temperature, speed and location.
Michelin solutions’ fuel experts analyze
this data and recommend ways fleet
managers and truck drivers can use less
diesel fuel when driving. The savings
can be as much as 2 liters of fuel for
every 100 kilometers driven.5
12 Digital Density Index
13. Fostering Enablers
Look beyond
digital infrastructure
High-speed broadband is important.
However, digital requires a much
broader range of enabling factors
beyond technology infrastructure.
Governments and businesses must
work together in at least four additional
areas to create an environment in which
digital can flourish.
The first is making it easier for
entrepreneurs to launch digital
businesses, which Italy did in 2014
by eliminating registration fees
for startups and establishing a
legal framework for crowdfunding.
The second is streamlining and
simplifying market rules to reflect
the degree of commerce, online and
offline, that now depends on digital.
The European Union, for example,
wants to put in place a “digital single
market” of 500 million people, based
on harmonized data protection rules,
ecommerce, telecommunications,
copyright and consumer protection.6
The third involves initiatives to develop
digital skills, such as Estonia’s nationwide
program called ProgeTiiger (Programming
Tiger) to teach children aged seven to 19
how to write software code.7
The fourth is consumer and citizen trust
that businesses and governments will
use their personal data responsibly.
Digital trust relies on secure
infrastructure and appropriate data
protection rules, as well as initiatives
by businesses to become increasingly
transparent with their customers as to
how and why their data is used.
Considering digital
density in business
growth and
investment decisions
As businesses increase their use of
digital technologies, they should
consider the Digital Density of the
countries and regions in which
they operate, and target for new
investments. The reason is intuitive:
A company heavily reliant on digital
for growth—for example, a bank that
wants to drive aggressive adoption
of its online banking capabilities—
should favor countries with greater
Digital Density.
In fact, a strong digital business
infrastructure across a region’s
markets, supply chains and talent
has become a critical criterion
for companies seeking to expand
or relocate. It’s just as important
as access to natural resources, a
good transportation system, and
skilled people. That’s especially
true as governments begin to seek
to actively boost Digital Density
to increase growth and national
competitiveness of economies.
And for businesses whose prospects
are closely tied to GDP, Digital
Density may be a leading indicator
of growth hotspots.
Digital Density Index 13
14. Conclusion
Government and business leaders know
they need to embrace digital technology as a
source of growth and increased competitiveness. Our
analysis confirms the benefit of doing so. But it also
reveals the time it takes for increased penetration
of digital technologies in economic activity to
translate into productivity and growth. That’s why
moving now, in a targeted way, to embrace digital
technologies is more critical than ever. Accenture’s
Digital Density Index can help leaders more
accurately determine how and where they should
invest to best leverage digital technologies to drive
competitiveness and economic growth, as well as
measure their progress along the way. The Index can
be a valuable guide for companies and countries
as they look to reshape themselves into the digital
powerhouses of the future.
14 Digital Density Index
15. Reference
1. For more information on the
Smart Service Welt program see
www.acatech.de/smart-service-welt
2. “Rio Tinto chief Sam Walsh hails
$80 million cash flow boost from
big data,” Peter Ker, Sydney Morning
Herald, March 14, 2014. www.smh.
com.au/business/rio-tinto-chief-sam-
walsh-hails-80-million-cash-flow-
boost-from-big-data-20140313-34pju.
html#ixzz3LIOZdTKC
3. “IRS Combats Identity Theft and
Refund Fraud on Many Fronts,” U.S.
Internal Revenue Service website,
www.irs.gov/uac/Newsroom/IRS-
Combats-Identity-Theft-and-Refund-
Fraud-on-Many-Fronts
4. U.S. General Services
Administration website.
www.gsa.gov/portal/content/190333
5. Information provided by
Michelin solutions
6. European Commission, “An Investment
Plan for Europe,” 2014. See: eur-lex.
europa.eu/legal-content/EN/TXT/PDF/?ur
i=CELEX:52014DC0903&from=EN
7. “To Get Kids Coding, Countries
Should Follow Estonia’s Programming
Tigers,” Greg Anderson, Arctic Startup,
February 27, 2013. www.arcticstartup.
com/2013/02/27/to-get-kids-coding-
countries-should-follow-estonias-
initiative
About the research
The Accenture and Oxford Economics
study on Digital Density was based on
three principal research components:
1. Collection of internationally
comparable observations across
hundreds of measures of digital
technology and related indicators,
from public and private sources.
2. From more than 50 of those
indicators, the construction of a
statistically tested composite Digital
Density Index for 33 major economies,
16 of which included partially
imputed scores.
3. Multivariate regression analysis
to estimate equations that explain
variation in countries’ total factor
productivity by reference to their
relative Digital Density Index scores.
The study estimates only the effect of
changes in total factor productivity on
GDP. Expanding Digital Density likely
will have additional positive GDP effects
from factors including expansion of the
digital/ICT sector and capital deepening
across the economy. Further analysis
could also consider other effects of
expanding Digital Density, including
effects on labor markets, public
finances, and investment patterns.
About the Accenture Institute
for High Performance
The Accenture Institute for High
Performance develops and publishes
practical insights into critical
management issues and global
economic trends. Its worldwide
team of researchers connects with
Accenture’s consulting, technology
and outsourcing leaders to demonstrate
how organizations become and remain
high performers through original,
rigorous research and analysis.
For more information, please visit:
www.accenture.com/institute.
About Oxford Economics
Oxford Economics is one of the
world’s foremost independent global
advisory firms, providing reports,
forecasts and analytical tools on 200
countries, 100 industrial sectors and
over 3,000 cities. Headquartered in
Oxford, England, with regional centres
in London, New York, and Singapore,
Oxford Economics has more than 100
economists and analysts—one of the
largest economics teams in the private
sector. For more information, visit
www.oxfordeconomics.com.
Digital Density Index 15
